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The paper is concerned with the problem of decentralized control of interconnected systems subjected to stochastic disturbances. It is proposed that an equivalent reduced order dynamic model be first obtained for the subsystem of interest. For this, a dynamic equivalent of the other subsystems is identified using the interaction measurements. This model is then adjoined with the model of the subsystem in order to obtain a reduced order model. The LQG theory is then applied to this reduced order model in order to obtain a decentralized proportional plus integral control law for reducing the frequency deviations in an interconnected power system to zero. The results are illustrated numerically for a four area system.